THE ROLE OF THE REPUBLIC OF KOREA IN INTERNATIONAL TRADE IN THE CONDITIONS OF GLOBALIZATION IN THE XXI CENTURY
THE ROLE OF THE REPUBLIC OF KOREA IN INTERNATIONAL TRADE IN THE CONDITIONS OF GLOBALIZATION IN THE XXI CENTURY
Olga Esina
Master Data Specialist, CJSC British American Tobacco-SPb,
Russia, Saint-Petersburg
ABSTRACT
The article examines the international trade of the Republic of Korea over the past few years, presents a general summary of the country's success in international trade and identifies the role played by the Republic of Korea in international trade in general. Import-export statistics are given, as well as the dynamics of changes.
Keywords: international trade, free trading, export capacity, innovation, South Korea, the global economy, WTO.
The foreign trade policy of the Republic of Korea (hereinafter - South Korea) has been formed over many decades. The formation was carried out under the conditions of the strategy of economic development through export production. South Korea is an excellent example of how a strong and pragmatic policy can achieve great economic success, occupying one of the leading positions in international trade today. The country has an excellent foreign trade policy, thanks to a well-laid foundation during the period of becoming on the path of international trade, namely from the 1950s, where American investment support played an important role for dynamic development. In 2022, South Korea exported over $684 billion worth of goods worldwide. This figure represents approximately 3.8% of total global exports [3].
South Korea is one of the newly industrialized countries in Asia, which has experienced high rates of economic growth in recent decades. As of the end of 2022, the South Korean economy ranks 10th in the world in terms of GDP, thus being one of the largest economies in the world. Moreover, the country has been ranked 10th place for the third year in a row, nominal GDP at the end of 2022 amounted to more than $2 billion [4].
It is important to note that South Korea is committed to establishing multilateral economic cooperation. For example, in September 1991, the country became a member of the United Nations Organization (hereinafter referred to as the UN), currently it is a member of all UN specialized agencies, and in 2007–2017, the representative of Korea was the Secretary General of the organization. The country is a member of the WTO, OECD, Interpol, G20, IAEA [2].
South Korea became the first country in the Asia-Pacific region to conclude a free trade area agreement with the EU, which came into force in 2011. The country is in the top 10 strategic partners of the EU, while the EU is the third largest export market for South Korea. In total, for 2022, South Korea is a party to 15 free trade and economic cooperation agreements (including the USA, China, India), and 10 more agreements are under negotiation.
It should also not be forgotten that South Korea is also actively involved in regional integration: the country is a member of APEC and is one of the dialogue partners of ASEAN. In order to expand economic cooperation, in 1999, a mechanism for in-depth interaction between ASEAN and China, Japan and South Korea was formed in the “ASEAN Plus Three” format. South Korea is a member of the Asian Development Bank and the Asian Infrastructure Investment Bank. What makes it obvious is the fact that South Korea is an active participant in international trade. In 2018, the country became the 6th largest exporter and 9th importer of goods in the world. Currently, Korean goods successfully compete with goods from other countries (e.g., China, USA, Japan, Vietnam) in the world market.
An important feature of the economy is that consumer goods produced in South Korea are more expensive domestically than abroad, due to the export orientation, the high purchasing power of the population, and the mentality of the Koreans. Let's consider more detailed import-export statistics for the last two years presented in the figure below [1].
Figure 1. Import-Export statistic of TOP 10 countries by 2021-2022 year (unit: US$1000)
As we can see, South Korea has the closest trade relations with China, the USA, Japan and Australia. All this is due to the fact that the country is a major exporter of industrial products with high added value: more than 50% of exports are electrical machinery and equipment (3rd place in the world in terms of exports of this product category), equipment and mechanical devices, vehicles. The main buyers, which are the countries listed above. Let's consider the same chart only as income rate as a percentage in the figure below.
Figure 2. Income Rate based on Import-Export statistics of TOP 10 countries by 2021-2022 year (UNIT: %)
The geographical structure of South Korea's exports is quite stable. China and the USA hold their positions as the largest markets. The main product category of exports to China is electrical machinery and equipment (more than 40% of deliveries), to the USA - vehicles (more than 25% of deliveries). Japan is South Korea's 3rd largest export market by value. Moreover, the growth in supplies to Vietnam occurred mainly due to an increase in the export of electrical machinery and equipment and is associated with the development of production bases by Korean manufacturers in the country [3].
Despite the COVID-19 and its restrictions regarding producing goods and shipments to other countries the country was able to set up this process within the restrictions, which made it possible to import the required product for countries that needed it.
To conclude, it doesn't take a genius to accept the fact that South Korea plays a significant role in international trade. In the current stage of globalization, under its influence, there is an interconnected action of trends, which contributes to the formation of a new quality of international trade. Secondly, the multiplicity, as well as the mutual influence and interweaving of existing trends in the development of international trade, are objectively due to the complication of the system of world economic relations. Thirdly, the Transnational Company, as the leading force, the “driver” of the modern world economy, contributes to the emergence of the latest trends in the development of world trade through its activities. The main profitable exports of South Korea are electronics and electrical engineering, automotive, shipbuilding and chemical industries.
In the model of the economic development of South Korea, the orientation towards meeting the needs of the external market occupies a central place. Various measures have been taken to stimulate export orientation, such as the creation of special export promotion organizations, a change in the exchange rate in favor of economic production, the exemption of firms that produce products for export from taxes and the issuance of subsidies and loans to them on favorable terms.
References:
- Korean International Trade Association. Available at: - http://www.kita.org/kStat/byCount_AllCount.do (accessed 12 January 2023).
- Ministry of Foreign Affairs Republic of Korea. Policy information. International Organization. Available at: - https://www.mofa.go.kr/eng/wpge/m_5460/contents.do (accessed 12 January 2023).
- WITS: World Integrated Trade Solution. Trade Summary of The Republic of Korea Available at: - https://wits.worldbank.org/CountryProfile/en/Country/KOR/Year/LTST/Summary (accessed 12 January 2023).
- World Bank. Available at: - https://datacatalog.worldbank.org/ (accessed 11 January 2023).